Should entrepreneurs forego traditional business plans

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A traditional business plan is often viewed as the mainstay of any new business.It is the document that will help secure funding from investors and will keep you on track to steadfastly achieving business growth. Many new entrepreneurs, however, have been adopting a ‘lean start-up’ approach for a number of years and this theory has recently been spread more widely by Steve Blank. (Blank is, among other things, a consulting associate professor at Stanford University and author of, ‘The Startup Owner’s Manual’). The lean start-up offers a more flexible approach. Entrepreneurs search for the right ‘business model’ to adoptpriorto developing their product and/or service. Learning byexperimentation and trial and erroris their adoptive pathway to business growth and profitability rather than creating and following a static business plan.

Traditional business plans include a 5 year forecast, with information on product development, projections on spending, etc. and often must adhere to a strict plan of action to secure funding.  It must be seen to be viable to investors or they won’t be interested.  (Customers aren’t even consulted about their needs prior to the product being developed!)

This is considered to be an out-of-date way to plan a new enterprise. Who can say what the economy will be doing in 3 years time never mind 5 years from now?  This type of business plan is seen more as a ‘tool’ to demonstrate to potential investors the viability of the product/service and also to allow investors to assess the potential of the entrepreneur. But, potential investors are pretty savvy these days and understand the necessity for greater flexibility and are willing to take a calculated risk on a well constructed business model.

Rather than spending time writing lengthy and precise business plans, entrepreneurs adopting lean start-ups are getting out from behind their office desks to meet potential customers and asking them what they want from the product – before spending money on its development.

Using a ‘business model canvas’,for instance, entrepreneurs can produce their basic plan, create their ‘minimum viable product’, take it to potential customers, then make small adjustments or even substantial ones according to customer needsbeforedeveloping the product.

Lean start-ups can, therefore, move at speed to take their product to market rather than ploughing through what can be long, step-by-step process of a traditional business plan which is not guaranteed to succeed.

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